Guide · Fund categories
SEBI's equity fund categories, and the rule each one must keep
By Shreedhanam Research · Updated
Short answer
SEBI sorts equity mutual funds into fixed categories, each with a minimum it must hold. A large cap fund keeps at least 80% in the 100 largest listed companies, mid cap and small cap funds at least 65% in their segment, and a multi cap fund at least 25% each in large, mid and small caps. A flexi cap fund needs only 65% in equity, of any size.
The rules, category by category
These are the minimums from SEBI's October 2017 circular on categorisation of mutual fund schemes, with the multi cap rule as amended in September 2020 and flexi cap as added in November 2020. Each fund house may run only one scheme in each category, except index funds, ETFs, fund of funds and sectoral or thematic funds.
| Category | What it must hold | Other rules |
|---|---|---|
| Large Cap | At least 80% in large-cap stocks | |
| Mid Cap | At least 65% in mid-cap stocks | |
| Small Cap | At least 65% in small-cap stocks | |
| Large & Mid Cap | At least 35% in large caps and at least 35% in mid caps | |
| Multi Cap | At least 25% each in large, mid and small caps | Rule since the September 2020 amendment |
| Flexi Cap | At least 65% in equity, any market cap | Category added in November 2020 |
| Focused | At least 65% in equity | At most 30 stocks |
| ELSS (tax saver) | At least 80% in equity | Three-year lock-in; one ELSS per fund house |
| Value / Contra | At least 65% in equity | A fund house may offer a value fund or a contra fund, not both |
| Dividend Yield | At least 65% in equity, mainly dividend-yielding stocks | |
| Sectoral / Thematic | At least 80% in the named sector or theme | More than one allowed per fund house |
What counts as large, mid and small cap
- Large cap: the 1st to 100th company by full market capitalisation.
- Mid cap: the 101st to 250th company.
- Small cap: the 251st company onwards.
AMFI publishes the list every six months, ranked on average market capitalisation across the exchanges. When a stock moves between segments, funds are given time to bring their portfolios back within their category's limits, so a fund can sit below its minimum for a short while after a list change without breaking the rules.
Multi cap vs flexi cap: the difference
Both may own companies of every size. A multi cap fund must keep at least 25% in each of large, mid and small caps at all times, so at least half the fund is outside the 100 largest companies. A flexi cap fund has no size floor: it can move almost entirely into large caps, or into mid and small caps, as long as 65% stays in equity.
For a client, the practical difference is how much small-cap exposure is guaranteed by the rules. A multi cap fund always carries a meaningful small-cap slice; a flexi cap fund carries whatever its manager chooses.
How to check whether a fund is keeping its rule
- Take the fund's latest monthly portfolio disclosure, published by every fund house on its website.
- Classify each holding as large, mid or small cap using AMFI's current list.
- Add up the weights and compare them with the category's minimum.
Fund X-ray in Shreedhanam does this for every equity scheme each month, from the fund house's own month-end disclosure, and shows the split next to the rule, with the disclosure's date. Keeping to the minimum is one thing; it does not say whether a fund is good or right for a client.
Questions
What is the minimum large cap allocation in a large cap fund?
At least 80% of a large cap fund's assets must be in large-cap stocks, which SEBI defines as the 100 largest listed companies by full market capitalisation.
What is the difference between multi cap and flexi cap funds?
A multi cap fund must hold at least 25% each in large, mid and small caps. A flexi cap fund only has to keep 65% in equity and can choose any mix of company sizes.
How many stocks can a focused fund hold?
At most 30. SEBI also requires a focused fund to keep at least 65% of its assets in equity.
What is the lock-in period for ELSS funds?
Three years. An ELSS fund must keep at least 80% in equity, and each fund house may offer only one ELSS scheme.
Who decides which stocks are large cap, mid cap or small cap?
AMFI publishes the list every six months, ranking listed companies by average full market capitalisation: 1st to 100th are large cap, 101st to 250th mid cap, and 251st onwards small cap.
Sources
For mutual fund distributors. This page is information, not investment advice or a recommendation to buy, sell or switch any fund.